The Unite trade union has warned that London bus drivers could strike during the Olympics as it prepares to launch an industrial ballot in a dispute over pay.

Britain's largest union, which represents 21,000 bus workers in the capital, has given notice of a strike ballot to the 21 private bus operators who run services in London. Unite is demanding a £500 payment for members to compensate for their "massive increase in workload" during the games between 27 July and 12 August, as the union predicted an extra 800,000 passengers will use the bus network.

In a statement, Unite urged the London mayor, Boris Johnson, to put pressure on bus operators over Olympics pay. "The failure of Boris Johnson to intervene and the bus operators' refusal to meet Unite means strike action could take place up to and during the Olympic Games, if there is no resolution," said Unite.

The mayor's Transport for London authority contracts out bus services to private operators, who are paid a fixed fee per route. A source at one London bus operator said the demands were "impractical and unreasonable".

The source added: "It is impractical to make payments like this when the contract terms are agreed with TfL. The contracts do not take into account this type of ad hoc demand. Any payments like this would have to be subsidised by TfL and they already have budget problems."

The TfL executive in charge of the bus network distanced the organisation from Unite's demands. "London bus drivers are employed by private bus companies and their pay and conditions are set by those companies," said Leon Daniels, TfL's director of surface transport. "If bus drivers are required to work additional hours they are always paid overtime accordingly."

As part of the government spending review, TfL's central government grant has been reduced by £2.2bn over four years.

Unite says its demands are in line with pay deals for staff at Network Rail, Virgin Trains and the Docklands Light Railway. The RMT union, the biggest union on the London Underground, is still negotiating a deal with TfL.

Unite's regional secretary for London, Peter Kavanagh, said: "If bus workers take strike action in the runup to and during the Olympics it will be because Boris Johnson and the bus companies failed in their duty to London. Boris Johnson has sat on his hands for almost a year while the bus operators have refused to even talk to Unite about their workers' extra contribution to the Olympics."